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Without prejudice to BIPRU 3.4.85 R, an exposure or any part of an exposure fully and completely secured, to the satisfaction of the firm, by mortgages on residential property which is or shall be occupied or let by the owner or the beneficial owner in the case of personal investment companies must be assigned a risk weight of 35%.[Note: BCD Annex VI Part 1 point 45]

(1) 4A firm must not treat a lifetime mortgage as an exposure fully and completely secured on residential property for the purposes of BIPRU 3.4.56 R unless the amount of the exposure is calculated according to the following formula:exposure amount =where:(a) P is the current outstanding balance on the lifetime mortgage;(b) i is the interest rate charged on the lifetime mortgage, which for the purposes of this calculation must not be lower than the discount rate referred to in

Without prejudice to BIPRU 3.4.85 R, an exposure or any part of an exposure to a tenant under a property leasing transaction concerning residential property under which the firm is the lessor and the tenant has an option to purchase, must be assigned a risk weight of 35% provided that the firm is satisfied that the exposure of the firm is fully and completely secured by its ownership of the property.[Note: BCD Annex VI Part 1 point 47]

(1) The application of BIPRU 3.4.81 R may be illustrated by an example. If a firm has a mortgage exposure of £100,000 secured on residential property in the United Kingdom that satisfies the criteria listed in BIPRU 3.4.56 R to BIPRU 3.4.80 R and the value of that property is £100,000, then £80,000 of that exposure may be treated as fully and completely secured and risk weighted at 35%. The remaining £20,000 may be risk weighted at 75% provided the exposure meets the criteria

If a CRD implementation measure in another EEA State implements the discretion in point 51 of Part 1 of Annex VI of the Banking Consolidation Directive, a firm may apply the same treatment as that CRD implementation measure to exposures falling within the scope of that CRD implementation measure which are fully and completely secured by mortgages on offices or other commercial premises situated in that EEA State.[Note: BCD Annex VI Part 1 points 51 and 57]

(1) If a CRD implementation measure in another EEA State implements the discretion in point 58 of Part 1 of Annex VI of the Banking Consolidation Directive to dispense with the condition in point 54(b) for exposures fully and completely secured by mortgages on commercial property situated in that EEA State, a firm may apply the same treatment as that CRD implementation measure to exposures fully and completely secured by mortgages on commercial property situated in that EEA State

Exposures indicated in BIPRU 3.4.56 R to BIPRU 3.4.63 R (Exposures secured by mortgages on residential property) must be assigned a risk weight of 100% net of value adjustments if they are past due for more than 90 days. If value adjustments are no less than 20% of the exposure gross of value adjustments, the risk weight to be assigned to the remainder of the exposure is 50%.[Note: BCD Annex VI Part 1 point 64]

Exposures indicated in BIPRU 3.4.89 R to BIPRU 3.4.94 R (Exposures secured by mortgages on commercial real estate) must be assigned a risk weight of 100% if they are past due for more than 90 days.[Note: BCD Annex VI Part 1 point 65]

Without prejudice to MIPRU 4.2F.36 R, an exposure or any part of an exposure must be assigned a risk weight of 35% where: (1) the exposure is fully and completely secured, to the satisfaction of the firm, by mortgages on residential property; and(2) the residential property is, or will be, occupied or let by the owner or the beneficial owner in the case of personal investment companies.

Without prejudice to MIPRU 4.2F.36 R, an exposure, or any part of an exposure, must be assigned a risk weight of 75% where: (1) the exposure arises from a mortgage on residential property up to a limit of 100% of the value of the property which is not fully and completely secured, to the satisfaction of the firm, by that mortgage; and(2) the residential property is, or will be, occupied or let by the owner or the beneficial owner in the case of personal investment companies.

An exposure or any part of an exposure must be assigned a risk weight of 100% where the exposure arises from a mortgage on residential property that exceeds the value of the available collateral, as assessed in accordance with MIPRU 4.2F.29 R.

(1) A firm must not treat a lifetime mortgage as an exposure fully and completely secured on residential property for the purposes of MIPRU 4.2F.4 R unless the amount of the exposure is calculated according to the following formula:where:(a) P is the current outstanding balance on the lifetime mortgage;(b) i is the interest rate charged on the lifetime mortgage, which for the purposes of this calculation must not be lower than the discount rate referred to in (c);(c) d is the

Without prejudice to MIPRU 4.2F.36 R, an exposure, or any part of an exposure, to a tenant under a property leasing transaction must be assigned a risk weight of 35% where: (1) the transaction concerns residential property; (2) under the transaction, the firm is the lessor and the tenant has an option to purchase; and(3) the firm is satisfied that the exposure is fully and completely secured by its ownership of the property.

(1) In exercising its judgment under MIPRU 4.2F.4 R to MIPRU 4.2F.9 R, a firm may be satisfied only if the conditions in (2) to (6) are met.(2) (a) The value of the property does not materially depend upon the credit quality of the borrower. (b) The condition in (a) does not preclude situations where purely macroeconomic factors affect both the value of the property and the performance of the borrower.(3) The minimum requirements about: (a) legal certainty in MIPRU 4.2F.12 R;

If a firm has an exposure arising through a second-charge mortgage secured on the same property as a first-charge loan from a different firm, the exposure, taking into account the first-charge mortgage, must be split into the following components and risk weighted as follows, after taking into account the seniority of the first-charge loan:(1) the amount of the exposure or any part of the exposure, up to a limit of 80% of the value of the residential property, must be assigned

The application of MIPRU 4.2F.33 R may be illustrated by an example. Where a first-charge mortgage exposure of £50,000 from another lender is secured on residential property in the United Kingdom that satisfies the criteria in MIPRU 4.2F.4 R to MIPRU 4.2F.29 R and the value of that property is £100,000, then a firm with a second-charge mortgage of £60,000 on the same property may treat £30,000 of that exposure as fully and completely secured and risk weight it at 35%, treat a further £20,000 as unsecured and risk weight it at 75%, and risk weight the remaining £10,000 at 100%. A diagrammatic illustration of this example is in (2).

(2)

A diagrammatic illustration of the example in (1)

Property value

Exposure and risk weightings

Example

£10,000 of second-charge - risk weighted at 100%

• Remaining second-charge mortgage, i.e. £10,000

£100,000

£20,000 of second-charge - risk weighted at 75%

• Second-charge mortgage up to maximum of 100% of property value, i.e. £20,000

£30,000 of second-charge - risk weighted at 35%

• Second-charge mortgage up to maximum of 80% of property value, i.e. £30,000

First-charge mortgage (£50,000)

• Other lender has first-charge over property with outstanding loan balance of £50,000

Exposures, or any part of an exposure, secured by mortgages on offices or other commercial premises must be assigned a risk weight of 100% where the exposure:(1) cannot properly be considered to fall within any other standardised credit risk exposure class specified in MIPRU 4.2A.6A R (Exposure classes); or (2) does not qualify for a lower risk weight under this section.

Where value adjustments are taken against the secured part of an exposure secured by a mortgage on residential property and that is past due, the secured part net of value adjustments must be assigned a risk weight of: (1) 100% if value adjustments are less than 20% of the secured part of the exposure gross of value adjustments; or(2) 50% if value adjustments are no less than 20% of the secured part of the exposure gross of value adjustments.

A firm may treat the secured part of an exposure covered by a mortgage indemnity product that meets the relevant eligibility criteria for credit risk mitigation as secured for the purposes of MIPRU 4.2F.51 R.

The application of value adjustments to either the secured or the unsecured component of an exposure secured on residential property may be illustrated on the basis of a £110,000 loan on a property valued at £100,000, where £80,000 of the loan is secured, £30,000 of the exposure is unsecured and a value adjustment of £20,000 is taken.

(1) The condition in BIPRU 4.10.6 R (3) does not apply for exposures secured by residential real estate property situated within the territory of another EEA State.(2) However (1) only applies if and to the extent that the CRD implementation measures for that EEA State in relation to the IRB approach implement the option set out in paragraph 16 of Part 1 of Annex VIII of the Banking Consolidation Directive (waiver for residential real estate property) with respect to residential

Where the FCA has published evidence showing that a well-developed and long-established residential property market is present in that territory with loss rates which do not exceed the limits in article 125(3) of the EU CRR (Exposures fully and completely secured by mortgages on residential property), a firm does not need to meet the condition in article 125(2)(b) of the EU CRR in order to consider an exposure, or any part of an exposure, as fully and completely secured for the

For the purposes of articles 124(2) and 126(2) of the EU CRR, and in addition to the conditions in those regulations, a firm may only treat exposures as fully and completely secured by mortgages on commercial immovable property located in the UK1 in line with article 126 where annual average losses stemming from lending secured by mortgages on commercial property in the UK did not exceed 0.5% of risk-weighted exposure amounts over a representative period. A firm must calculate

The FCA considers an Ijara mortgage to be an example of an exposure to a tenant under a property leasing transaction concerning residential property under which the firm is the lessor and the tenant has an option to purchase. Accordingly, the FCA expects exposures to Ijara mortgages to be subject to all of the requirements that apply to exposures secured by mortgages on residential property, including in respect of periodic property revaluation (see articles 124 and 125 of the

The FCA expects a firm with exposure to a lifetime mortgage to inform the FCA of the difference in the own funds requirements on those exposures under the EU CRR and the credit risk capital requirement that would have applied under BIPRU 3.4.56A R.The FCA will use this information in its consideration of relevant risks in its supervisory assessment of the firm (see articles 124, 125 and 208 of the EU CRR).

When determining the portion of a past due item that is secured, the FCA expects the secured portion of an exposure covered by a mortgage indemnity product that is eligible for credit risk mitigation purposes under Part Three, Title II, Chapter 4 of the EU CRR (Credit risk mitigation) to qualify as an eligible guarantee (see article 129(2) of the EU CRR).

(1) If an obligor approach is being taken with respect to retail exposures (that is, the application of the definition of default at an obligor level rather than at a facility level as set out in BIPRU 4.6.21 R,) a firm should ensure that the PD associated with unsecured exposures is not understated as a result of the presence of any collateralised exposures. A firm should be able to explain to the appropriate regulator, if asked, how it has ensured that its estimate of PD is

To calculate risk weighted exposure amounts on exposures secured by mortgages on residential property, risk weights must be applied to all such exposures, in accordance with MIPRU 4.2F.4 R to MIPRU 4.2F.10 G3.33

This section applies to a firm carrying on any home financing connected to regulated mortgage contracts or home financing and home financing administration connected to regulated mortgage contracts see 1MIPRU 4.2.23 R where it applies credit risk mitigation1 to the calculation of its risk weighted exposure amounts under MIPRU 4.2A (Credit risk capital requirement)1.11

An exempt BIPRU commodity firm will, by virtue of the definition of BIPRU TP 15, be exempt from completing FSA003 (and thus FSA004, FSA005, FSA006 and FSA007) for the duration of the transitional provision. It is however required to submit all other data items applicable according to the firm's BIPRU classification including, for the avoidance of doubt, BIPRU TP 16.

(4) If there are more than three material currencies for this data item, (3) only applies to the three largest in amount. A firm must identify the largest in amount in accordance with the following procedure.

(a) For each currency, take the largest of the asset or liability figure as referred to in the definition of material currency.

(b) Take the three largest figures from the resulting list of amounts.

(5) The date as at which the calculations for the purposes of the definition of material currency are carried out is the last day of the reporting period in question.

(6) The reporting currency for this data item is whichever of the following currencies the firm chooses, namely USD (the United States Dollar), EUR (the euro), GBP (sterling), JPY (the Japanese Yen), CHF (the Swiss Franc), CAD (the Canadian Dollar) or SEK (the Swedish Krona).

Note 30

Note 29 applies, except that paragraphs (3), (4) and (5) do not apply, meaning that material currencies must not be recorded separately.

FSA047, FSA048, FSA050, FSA051, FSA052, FSA053 and FSA054 must be completed by an ILAS BIPRU firm. An ILAS BIPRU firm does not need to complete FSA055. A non-ILAS BIPRU firm must complete FSA055 and does not need to complete FSA047, FSA048, FSA050, FSA051, FSA052, FSA053 and FSA054.

Note 34

This data item must be reported only in the currencies named in FSA052, so that liabilities in GBP are reported in GBP in rows 1 to 4, those in USD are reported in USD in rows 5 to 8, and those in Euro are reported in Euro in rows 9 to 12. Liabilities in other currencies are not to be reported.